Matters:

The company announced its 2022 report that it achieved revenue of 433 million yuan, an increase of 8.26% over the previous year; achieved net profit of 185 million yuan, an increase of 10.02% over the previous year; achieved net profit of 173 million yuan after deduction, an increase of 7.29% over the previous year; and EPS was 1.28 yuan/share. The company's performance is generally in line with expectations. The 2022 annual performance allocation plan is: 6.00 yuan (tax included) for every 10 shares.

Ping An's point of view:

Core varieties remained steady in '22, and we are optimistic that the medical recovery in '23 will drive demand growth. The company's revenue in 2022 was 433 million yuan (+8.26%), which remained steady under the influence of the pandemic. Core varieties of dental prosthetic membranes earned 207 million yuan (+8%), absorbable hard brain (spine) membranes earned 156 million yuan (-1%), bone repair materials earned 39.48 million yuan (+11%), and other varieties earned 30.7 million yuan (+101%). The absorbable hard (ridges) membrane has won bids in all six collecting provinces, promoting price in exchange for volume. Other varieties are growing fast, and we think they are mainly benefiting from the release of new varieties and surrogate dental implants. In the context of post-epidemic recovery in 2023, we are optimistic that the growth rate of the company's core varieties will pick up. At the same time, the company's major new product, active biobone, will enter the full release year in 2023, which is optimistic that it will bring additional volume to the company.

The company has extensive research pipelines, and many products have entered the clinical research stage. In 2022, the company obtained registration certificates for new varieties such as self-acidifying adhesives, active biological bones, and hard brain (spine) membrane patches. At present, the company's light-curing composite resins, calcium-silicon bioceramic bone repair materials, breast supplements, etc. have entered the clinical research stage, and the oral cavity and soft and hard tissue repair series are continuously being added. The next high-potential variety of intrauterine repair membrane has completed the first patient enrollment. This variety is used to prevent re-adhesion after mild to moderate uterine adhesions separation surgery, and is expected to restore patients' fertility.

Optimistic about post-epidemic recovery in 2023 and the amount of active biological bone released, maintain the “recommended” rating. We believe that in the context of post-epidemic recovery, the growth rate of the company's core varieties is expected to gradually pick up. At the same time, active biological bone helps the company explore the orthopedic market with more market space. The continuous implementation of products under development helps the company continue to raise its ceiling. Considering the impact of the 2022 pandemic on terminal promotion, we adjusted our net profit forecast for 2023-2024 to 239 million yuan and 297 million yuan (the original forecast was 299 million yuan, 360 million yuan), while the net profit for 2025 is expected to be 372 million yuan. The current stock price corresponds to 35 times PE in 2023, maintaining the “recommended” rating.

Risk warning: 1) Product concentration risk: The company's revenue is concentrated on dental prosthetic membranes and meningocele. If the competitive pattern or market environment changes, it may adversely affect performance. 2) R&D risk: The company is developing many varieties, and there is a risk that R&D progress falls short of expectations. 3) Risk that the volume of new products falls short of expectations: There is a possibility that the promotion progress of new varieties represented by active biological bones will fall short of expectations.